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Business News of Tuesday, 6 December 2016

Source: B&FT

Cedi to depreciate even further - Dr. Lord Mensah

Economist Dr. Lord Mensah is predicting a further depreciation of the cedi ending the year beyond 4 cedis.

According to Dr. Lord Mensah the festive season is likely to see the cedi depreciate as demand for the currency by traders is increasing for the short-term trading during the festive season.

He also asserted that, the recent auctioning of the cocoa syndicated loan proceeds by the central bank was to also an avenue see cedi depreciate considerably.

The Central Bank has hinted of tightening its monetary policy to stabilize the cedi.

According to figures from the Bank of Ghana the cedi has depreciated by 4.3 percent as at November 18, 2016 compared to 15.5 percent as at October 2015 in the corresponding period of 2015.

But Speaking to the Economist and Senior Lecturer at the University of Ghana Business School Dr. Lord Mensah said currently supply outstrips demand for dollars which is expected to see the cedi depreciate beyond 4 cedis 50 pesewas.

“Let me say that, projections need to be backed with data and current data available shows that the Cedi is likely to depreciate further ending the year at GHC4.50. This is because signals from the market, shows higher demand for the dollar to pay for orders of goods to be imported into the country for the festive season and first quarter of 2017.”

“You know the auction process using the cocoa syndicated loan by the central bank is also going to sway the cedi exceeding the 4 cedis mark earlier projected. All this is likely to impact on the cedi negatively causing it to depreciate further against the dollar and other major trading currencies,” he added.

Dr. Lord Mensah’s assertion was because, commercial banks in the country were likely bid above current trading of the cedi to the dollar which was 1 dollar to GHC3.95 during the auctioning of the 1.8 billion dollars cocoa syndicated loan in three tranches of 20 million cedis to the tune of 60 million before the close of the year.

Meanwhile the Governor of Bank of Ghana (BOG) Dr. Abdul Nashiru Issahaku had earlier rejected claims that the cedi was likely to see further depreciation heading into the elections and festive season.

Dr. Abdul Nashiru Issahaku maintains the cedi in recent times has shown remarkable strength against the dollar and other trading currencies.

Latest data from the same central bank reveals that the cedi, as at November 18, has depreciated against the USD by 4.6 percent, the highest in 2016.

The checks on the market reveals that, the stress on the local currency could be down to seasonal demands ahead of Christmas festivities and/or the work of speculators who want to cash in on the uncertainties surrounding the December 7 polls.

West Africa’s worst performing currency; the Ghana Cedi has been projected to depreciate by about 5 percent this year. This means it will trade at 4 cedis 50 pesewas to a dollar by the end of December.

However, the performance of cedi against the British pound has been has been remarkable with the local currency gaining on the pound by 13.7 percent as at November 17.

The cedi holds a similar success story against the Euro, depreciating by just 2.4 percent within the period in review.